Passive income allows you to work less and earn more at the same time. Usually, you need to invest money or time upfront in order to get passive income. However, after everything is set up, there’s usually little to no maintenance work left to do. This implies that you can unwind as the money comes in. These passive income streams are some of the greatest places to start, however they won’t always be simple.

1. Dividend stocks

The concept of dividend stocks is simple: you invest in a company’s stock, and in turn, that company rewards you with regular dividend payments. Dividends are typically on a quarterly schedule, but some dividend stocks pay monthly.

Dividend stocks usually pay a yield that might seem small, such as 3 percent. But the best dividend stocks increase their payouts each year, and the best of this group is called Dividend Aristocrats. It’s usually better for investors to look for a company with a track record of increasing dividends than to chase high yields, since a stock’s high yield may be a sign that investors believe the yield is unsustainable. Other positive signs include a company that is increasing revenues and generating consistently positive cash flow.

2. Real estate

Real estate is a good investment because this industry will never go away. Real estate can generate significant cash flow, and owners can also enjoy a significant tax shield from a property’s depreciation. In addition, real estate tends to have a weak correlation with the stock market, meaning that it can help investors diversify their risk.

Of course, real estate isn’t always a passive investment. Some properties can need significant work, and some tenants require more attention than others. However, real estate can still be mostly passive. One way to make the property more of a passive activity is to hire a property manager to oversee the day-to-day operations. Property managers charge a fee, but they allow you to earn a return without a big investment of your time.

You can invest in real estate in a variety of ways, depending on which is most appropriate for your time and talents.

3. Index funds

Another way to invest passively is with index funds. These investments are mutual fund or exchange-traded funds (ETF) that aim to mirror the performance of an index of stocks or bonds. For instance, a stock index fund might track the performance of the S&P 500, a collection of about 500 of America’s top companies. Instead of buying stocks in hundreds of companies, you can simply buy shares in an S&P 500 index fund.

Index funds provide passive income in the form of dividends and can generate substantial wealth over time. The S&P 500 has risen about 10 percent annually on average over long periods. Index funds tend to have lower fees or expense ratios, than actively managed mutual funds.

4. Bonds and bond funds

Bonds are an investment that allows investors to earn passive income. Typically, companies and governments issue bonds to help fund their operations, and they pay interest to investors in return. Bonds pay investors in regular intervals, usually twice per year. A bond has a defined lifetime, which is called its maturity. If you hold the bond until maturity, you will receive the face value of the bond back as well as its interest payments.

Another benefit of bonds is their relative stability. They tend to be safer investments than stocks, so financial advisors often recommend them to help reduce a portfolio’s volatility. The other side of this coin is that they tend to have lower returns than stocks in the long run. However, their lower volatility can be beneficial to investors, especially those nearing retirement.

5. High-yield savings accounts and CDs

If you want to earn passive income with minimal risk, one way to do that is with a high-yield savings account at an online bank. Interest on these accounts is usually paid monthly. While rates can fluctuate often, rates at online banks are usually much higher than the national average. In addition, these accounts are usually FDIC-insured up to $250,000, making them a safe place to keep your cash.

Alternatively, you can store your money in a certificate of deposit (CD). These accounts may pay rates even higher than high-yield savings accounts. However, they require you to keep your money in the account for a certain time, anywhere from a few months to several years. If you want to access your money sooner, you’ll have to pay a penalty. So, CDs are less suitable for short-term savings. To find the best CD rates, you’ll want to look nationally rather than going with just a bank in your local area.

Below are some other options you might want to consider:

Peer-to-peer lending

Another way to earn passive income is with peer-to-peer lending. With this investment, you lend money to businesses or individuals through online platforms. In return, they’ll pay you interest over time. Generally, these borrowers are unable or unwilling to use traditional financing.

This avenue can be riskier than other passive streams, but if you are willing to accept more risk, you can earn a higher return. You’ll need to vet potential borrowers, however, and it’s useful to diversify your risk by lending to a variety of borrowers, so you don’t depend on just one borrower or a few.

Real estate investment trusts (REITs)

If you’re interested in investing in real estate but like the convenience of just receiving a dividend check, then real estate investment trusts may be for you. A REIT allows you to invest in a diversified portfolio of real estate investments, and none of the management responsibilities will fall to you as the investor. Instead, REITs pool investor funds to buy and manage properties such as shopping centers, office buildings, apartment complexes and many more.

Read Also: The Ultimate Guide to Creating Passive Income Streams

The best REITs will increase their payouts year after year, giving you a growing income stream, and you have multiple ways to invest in them. You could pick individual REIT stocks or go with a REIT fund, diversifying your exposure while still receiving a nice dividend.

What is the Easiest Form of Passive Income?

Your biggest asset for accumulating wealth is your income, which usually needs five days a week of work. It’s safe to say that even if you adore your current career, you wouldn’t mind having a little extra money without having to put in as much effort, sweat, tears, or time for another employment. Creating a passive income stream can help you with the following:

• Increase your wealth
• Allow you to retire early
• Protect you from a complete loss of income if you lose your job
• Provide an additional source of income in retirement

1. Buy real estate.

One way to build passive income (after you’re debt-free and have some cash saved up) is to buy real estate and rent it out to tenants. But before you buy a rental property, pay off your own home first and purchase your investment property with cash. Don’t ever go into debt to buy a rental property.

It’s also worth saying: A rental property can be a great source of extra income, but it technically isn’t passive income. You’ve got to market it and keep up with maintenance and cosmetic updates if you want it to pan out as a source of income. It takes time and effort to decide how you’ll rent out the property and how to manage it—unless you hire a property management company, but that would mean less income for you.

We suggest buying a property somewhere that’s convenient for you to visit so you can personally keep an eye on it. Find a real estate agent who knows your area well and knows what will attract renters.

2. Rent out your house.

If you still have some debt to pay off or can’t afford to take on a whole rental property, consider renting out a spare room. Having a roommate or the occasional Airbnb guest is a great way to sit back and add extra money to your budget—if you don’t mind sacrificing some privacy.

But there are a few potential problems with going the Airbnb route. First, they can be an absolute hassle to manage. Getting people in and out—and cleaning the room in between check-ins—can feel like having a second job, especially if you have multiple people renting that room each month. Plus, you should expect to take on lots of extra maintenance costs (like replacing ripped-up carpets and fixing dents in the wall) caused by troublesome renters.

You also might need to add extra layers of coverage to your existing homeowners’ insurance policy or get a new type of coverage altogether . . . and that can get really pricey. So you should probably talk to your insurance agent before listing your extra room on Airbnb! 

3. Store people’s stuff.

People have a lot of stuff—and they’re always looking for cheap ways to store it. If you have some space in the basement or the garage, what could be easier than having people pay you to store their stuff? You’ll just need to make sure their items are safe and secure.

Check out websites like Neighbor, iStoreit or Store At My House to get started. These are services that can put your indoor or outdoor space to work. Will people pay a ton to have you store their off-season wardrobe? Maybe not—but it can add up over time.

And if you have a barn, garage or even just carport space to store vehicles, boats, campers and other high-dollar toys, people will pay more to keep them safe and weatherproof. Set it (safely) and forget it—talk about passive income!

4. Rent out useful items.

Do you have any items you don’t use all the time that others would like to borrow? Things like a trailer, trampoline, kayak, or even your own yard or backyard pool could earn you passive income as rental items.

If you have more sports gear than you could ever use all in one week—things like bikes, surf boards or a pair of skis lying around—you can rent it out on a site like Spinlister. You can also explore popular rental websites like Fat Llama (yes, that’s really the name). All you have to do is upload pictures of your items, set a price, and tell the world they’re ready for rent.

If you’re not quite ready to tell the world, consider starting with just your neighborhood. Got a chainsaw, pressure washer or lawn aerator? Larger tools can rent anywhere from $30–70 (or more) for just a half day at retail stores, so there’s a lot of potential cha-ching there.

Hop on your community’s social media sites and start posting, or distributing flyers the old-fashioned way. Hit it during the right season, and your flyers could get a premium spot on your neighbors’ refrigerator doors—and that leads to phone calls. Just remember to set up some rules so you don’t end up with ruined tools you have to replace from your own pocket.

5. Rent out your vehicles.

Have an extra car or truck sitting in your garage? You can list your car on Turo—which lets folks rent out their vehicles to locals or tourists who need a ride for a few days. And the boat that’s been taking up space in your backyard? Check out Boatsetter to make some extra passive income with your pontoon boat on a weekend when you won’t be on the water.

But renting out your vehicle to complete strangers could require additional insurance coverages and lots of maintenance costs . . . consider yourself warned!   

6. Start a blog or YouTube channel.

If you have a brilliant idea that appeals to a specific audience, you could create something like an educational blog or a YouTube teaching series that doesn’t require constant new material to generate online traffic.

If your content is engaging and gets enough daily traffic, you could sell ad space on your blog or ad spots on your channel. After you put in the heavy lifting, you can sit back, relax and enjoy streams of passive income for every set of eyeballs that watches your content. Not bad!

Now, keep in mind, that some forms of passive income are less passive—aka more work—than others. There’s a lot of competition out there in the digital space, so even though you don’t have to go out and spend a million dollars on cutting edge technology and advertising to get attention, you do need to update your content on a regular basis to keep getting looks.

That could mean adding brand-new videos and posts, or you could just update the keywords and outdated details from time to time.

7. Write an e-book or digital guide.

If you’ve figured out how to create content that gets enough traffic to host ads, think about how you can turn that content into a product. It could be anything from a simple e-book or meal-prep guide to a complete online course or an app.

And writers: There are self-publishing options everywhere and several of them, including Kindle Direct Publishing (KDP), are free. If you have some marketing skills and good pals who’ll spread the word—plus (sorry, but this just needs to be said) if your books are actually a decent read—then go for it! You could still see royalties trickle in years down the road. Yay, passive income!

8. Create an online course.

With learning sites like Udemy, you can use your know-how to create a course on their platform. Once it’s published, it doesn’t require any additional maintenance from you, and you get paid when people take your class. It’s a low-output way of making some extra cash and helping people. That’s like a win-win . . . win.

9. Sell stock photos or music.

You could also sell something that taps into your creative skills. For instance, if you’re a good photographer, sell stock photos on sites like Foap or create preset photo editing filters for people to download. If you dabble in music production, license your tunes and sell them to YouTubers and podcasters to use for their content.

10. Design custom products.

Do you have some artwork that might look awesome on a T-shirt? Or a funny slogan you’d like to slap on a coffee mug? You might want to think about uploading your original designs to print-on-demand websites like Redbubble, Spring (formerly known as “Teespring”) and Zazzle.

Most of these services are free to join and make it easy to showcase all your original designs. You still need to promote and advertise your designs, but each time someone orders a shirt, sticker or bucket hat (the ’90s called—they want their fashion trends back) with your design on it, you make money. And the best part is, they’ll handle all the logistics—from the production, storage and shipping of your products—so you don’t have to. It’s that simple!

Final Words

Like we said, the list of passive income ideas could go on forever. As you search for the best fit for you, you’ll want to ask yourself these questions:

• Do other people make money doing this?
• Which passive income strategy would I be best at?
• Does this idea show a positive long-term track record?
• Has this idea ever come back to bite someone who tried it?
• How much time will this actually take me after the initial setup?

Don’t fall for any passive income ideas that promise a quick return or require huge amounts of money up front—like vending machines or opening a laundromat. Things like that require way too much time and money to be considered passive and could ultimately sabotage your financial goals. Look for ideas that are steady, profitable and trustworthy. Do your research. And never go into debt!